Microsoft cuts 10,000 and Apple's AR plans change

Hi all. I'm in the Seattle area to spend a bit of time with my parents this week and I'll be keeping this issue to two brief sections. Given the top news of the day, it feels a little surreal being here on what would otherwise be an ordinary gray and rainy day east of Lake Washington.

"Difficult, but necessary"

Microsoft announced layoffs for 10,000 employees today. Bloomberg's Dina Bass reported that the HoloLens team will see cuts, part of the planned "changes to [Microsoft's] hardware portfolio" referenced in today's SEC filing and a memo from CEO Satya Nadella.

So, the bleak mass tech layoffs continue, with word of 18,000 cut at Amazon making today a double whammy. Seeing Microsoft's AR hardware efforts take a hit here is not surprising. Microsoft saw a recent injection of cash to develop version 1.2 of IVAS, but it's reeling from congressional pushback toward the Army offshoot and the resignation of leader Alex Kipman after reports of alleged misconduct. Microsoft might have spent 2022 insisting that work on a new HoloLens was continuing steadily in search of "a meaningful update" over 2019's HoloLens 2, but this makes the future for in-house AR hardware seem dreary.

Studios in Microsoft's games group, including the Halo team 343 Industries and Fallout/Elder Scrolls developer Bethesda saw layoffs today as well. Many outlets were quick to note that today marks one year since Microsoft announced its intent to buy gaming giant Activision Blizzard in a $69 billion deal; while Microsoft and the FTC continue to duke it out over the acquisition, it's hard not to wonder how today's news might also see a shift in priorities regarding how Activision Blizzard would "provide building blocks for the metaverse."

In his message to employees, Nadella mentioned neither the metaverse or AR. The only technology to get namechecked as Nadella opened with the customary talk of headwinds and promise on the horizon is what you'd probably guess it'd be:

We’re living through times of significant change, and as I meet with customers and partners, a few things are clear. First, as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less. We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one. At the same time, the next major wave of computing is being born with advances in AI, as we’re turning the world’s most advanced models into a new computing platform.

"These decisions are difficult, but necessary," Nadella added toward the end of the memo. The idea of this move being a necessity will be little comfort to those affected, of course, and Microsoft signaling that AR might be moving down its priority list moving forward should be concerning to most everyone in immersive tech.

Apple hits pause on AR glasses

Wayne Ma and Mark Gurman have more on Apple's headset plans, with dual reports from The Information and Bloomberg amounting to this: after it finally gets around to releasing its first headset, expect Apple to follow it up with a cheaper mixed reality headset.

Oh, and don't hold your breath for a pair of glasses. Apple's putting those plans on hold.

For Bloomberg, Gurman reports that Apple is "indefinitely" delaying its N421 glasses rather than kicking the projected release (at one time pinned to last year) any further down the road. In the meantime, work is under way on a new mixed reality headset that Ma's reporting indicates will be closer in price to an iPhone.

Here's a few thoughts on what this could mean, less for Apple but for the others in immersive tech that have been waiting to see what it'll do.

One: this might precipitate a broader cooling off on AR tech. If things break this way I don't think it'll be a trend that Apple started (see the last section) so much as one that it might simply be accelerating with this decision. The promise of tech giants, chiefly Apple, angling to get consumer-targeted AR glasses out within a few years has been helping fuel interest and investment for the better part of a decade. We've been seeing that as the necessary pieces for what could be great glasses have improved, the companies with the resources to hold off until we're closer to "perfect" have been snapping up promising component makers. While Apple and peers play wait-and-see, it could become significantly harder for smaller companies with a claim to something special in AR to build for much besides the hope of an acquisition.

Two: established headset makers would do well not to be distracted by the features of Apple's first device if a cheaper alternative is on the way. Apple might be cementing mixed reality as the hotbed for competition and innovation by punting on AR, but we still don't know how the high-end headset's specs are going to enable experiences worth whatever the price ends up being. There's basically no way a device costing around as much as an iPhone is going to show us anything mind-blowing relative to existing hardware–and so, competitors should be paying attention less to Apple's screens and sensors and more to aspects like the user experience that could span across devices.

A pricey Apple headset might not be a huge boost to adoption no matter how great it is, while a cheaper one could become a hit simply by being easier and more enjoyable to use than today's devices. Then again, something that's a lot closer to a phone strapped to someone's face might struggle to win people over if it doesn't feel close enough to true AR.

That brings me to three: this should put the idea that Apple is already far ahead of the competition to rest. The similarities between this and recent shakeups at Meta and Snap suggest everyone's feeling uncertainty around AR, and with so many now refocusing on passthrough at around the same time… mixed reality could be an exciting, fairly even playing field instead of one company's stepping-stone before the next big thing.